New EUR100m INVL Asset Management fund targets sustainable investments in farmland and forests

INVL Asset Management (INVL), an asset management companies for the Baltic Sea region, has launched INVL Sustainable Timberland and Farmland Fund II. These funds will look to target investments into both sustainably managed forests and agricultural farmland in the Baltic Sea region, as well as the neighbouring countries of Central and Eastern Europe more broadly. 

The target size for the Fund is EUR100 million after a first close of EUR32 million from institutional and private investors on 4 November 2020, with a hard cap positioned at EUR200 million. The Fund is specifically intended to target both institutional and private investors from European countries generally.

This new sustainability driven Fund conforms with INVL’s existing ESG strategy and is registered in Luxembourg, administered by Apex Group a global financial services provider and one of the biggest providers of fund services in Europe. INVL appointed Apex due to its ability to offer market leading depositary and fund administration services in the registration domicile. INVL as the Portfolio Manager will manage origination and investment decision-making processes and divestment activity over time as well as overall returns generation. 

The Fund will look to create efficiencies for the sustainable management of forest and farmland portfolios. In doing so, it will also aim to utilise current, strong market dynamics for investments of this kind in what is still a fragmented market, with significant scope to consolidate facing relatively unexploited regions with positive end user potential. A key factor in the launch of this Fund was that the blend of forestry and farmland will yield high returns as well as attractive portfolio diversification and low correlation to other asset classes.

Risk mitigants for the strategy include long-term tenancy agreements for farmland rooted in exacting diligence and a keen focus on the most fertile regions. Furthermore, forestry harvesting will be carried out based on optimised demand and market prices, with senior management deploying efficient timelines operationally. 

INVL has already identified an existing EUR45 million pipeline of farm and forest land in the Baltics. 

The INVL Baltic Farmland fund currently manages some 3,000 hectares of land in Lithuania with a most recent valuation estimating an impressive 17% IRR since first acquisitions of farmland plots back in 2005. INVL’s track record in forestry has shown a net IRR of 27.4% over 3 years, after consolidating 4,290 hectares of forest in Lithuania (https://www.invl.com/lit/en/alternative-investments/invl-farmland and https://www.invl.com/lit/en/alternative-investments/invl-baltic-forest-… for background purposes). 

This news comes after INVL Baltic Sea Growth Fund, the largest private equity investment fund for the Baltic region successfully completed a final close in February of this year, reaching a total of EUR164.7 million.

Vytautas Plunksnis, Head of Private Equity at INVL, says: “We see this Fund as an exciting continuation of INVL’s Baltic Forests Fund I which was launched in 2017. However, this time round there will be a much more extensive approach and a broader geographical footing. Further to the experience we have gained, and subsequent investor confidence, we have been encouraged to establish longer-term portfolios of top-quality forests and agricultural land assets. We intend to manage and develop them in accordance with the strictest standards of sustainable forestry and agriculture.

“The Fund’s maximum size will be limited however with a hard cap in the region of  EUR200 million, though its investor composition may change over time as some of its participants take advantage of their right to leave the Fund within a certain period of time and others replace.”

Martynas Samulionis, Partner at the INVL Sustainable Timberland and Farmland Fund II, says: “We intend to build on our existing pipeline across the Baltic countries more generally. We will initially look to invest in Baltic coniferous forests and agricultural land that presents a high level of productivity and significant potential to consolidate.

“We then plan to expand the portfolio into Eastern European countries where investment returns are attractive, and the regulatory framework environment is stable. As a standard protocol, we will heavily emphasise the sustainable management of both forests and arable land, ensuring nature conservation as a core focus, as well as the social responsibility of investing in these asset classes. The Fund will of course function according to sustainable forestry standards, and we will implement sustainable farming principles on the agricultural land as a matter of course.”

Philippe Nicolet, Client Onboarding Manager, Luxembourg at Apex Group, adds: “We are delighted to have partnered with INVL to facilitate the registration and establishment of these new funds, enabling INVL to simplify operations and focus on their core business objectives. We look forward to continuing to work together as they pursue a sustainable investment approach to farmland and forests.”